Many businesses and homeowners are struggling to determine the extent of their damages from what is shaping up to be the worst year in Texas history for fire losses.
In handling the crisis, policyholders must quickly evaluate their available insurance coverage. A delay in identifying coverage and claiming policy benefits may compound problems and can foreclose coverage altogether. In the case of businesses, failure to pursue available insurance can even result in liability to shareholders.
Agents can help their clients by reviewing their policies and determining which ones could provide coverage. In doing so, agents should also consider what additional coverage may be purchased to protect those clients not yet affected.
Agents should first look to their business clients’ commercial property policies. Most businesses carry this type of insurance, which covers assets lost or damaged as a result of various perils. The policies generally cover fire losses, but agents and their clients must consult the actual policy language in evaluating coverage issues.
Agents should determine whether their clients carry business interruption coverage, which can be crucial to a company’s survival. These policies typically compensate business owners for lost income and ordinary business expenses as long as the policyholder’s business premises actually suffered damage from the fire.
Contingent business interruption coverage may also apply. Many businesses in affected areas will find that their customers or suppliers cannot do business because of their own physical damage. Contingent business interruption coverage applies in such a situation, protecting a policyholder’s profits following damage to property belonging to the insured’s customers or suppliers.
Other Business Coverages
Agents should also consult their clients’ policies to determine whether other types of coverage may apply. For instance:
Extra Expense Coverage reimburses a policyholder for necessary expenses in excess of operating expenses incurred during the restoration period while its business recovers from the physical damage.
Ingress/Egress Coverage may apply when customers, suppliers or workers cannot get to the policyholder’s property.
Interruption of Computer Operations Coverage compensates a business owner for income lost when operations are suspended because of an interruption in computer functioning resulting from a covered peril.
Utility Services Coverage compensates for business interruption losses caused by loss of power or communication services.
Civil Authority Coverage reimburses an insured for income lost when a civil authority prohibits access to a business due to physical damage to other property.
Coverage for Homeowners
When it comes to individuals, an agent’s first stop should be clients’ homeowners policies, which typically reimburse policyholders for the repair or replacement of their homes or personal property.
Dwelling Coverage pays for damage to a home. It typically includes coverage for unattached structures, such as fences, detached garages and storage sheds.
Personal Property Coverage compensates the homeowner if items in the house are stolen or damaged.
Liability Coverage covers a homeowner if he is sued and/or found legally responsible for someone else’s injury or property damage.
Medical Payments Coverage may pay medical bills for people hurt on the homeowner’s property (and sometimes away from it).
Loss of Use Coverage reimburses homeowner for additional living expenses if they must temporarily move because of the damage.
Making a Claim
In the event of a loss, agents should immediately advise their clients to take steps to preserve coverage. Under most policies, an insured must:
- Give prompt notice to the insurer;
- Attempt to protect the property from further loss or damage (if possible);
- Provide the insurer with a written proof of loss as outlined in the policy. Under commercial policies, this usually must be accomplished within 90 days, but can be extended depending on the circumstances. If an extension is needed, the insured must request one and should obtain the insurer’s permission in writing;
- Allow the insurer to inspect the property and otherwise cooperate with the insurer;
- Keep a record of any and all expenses;
- Resume business activities as soon as possible.
Agents should immediately provide notice to the carrier and work with the policyholder to assess and document the damage. Agents can also aid in preparing proofs of loss and advising clients how to handle adjuster inspections. Since every policy will include its own conditions, agents and their clients should closely examine provisions to determine the various requirements.
Preparing for Disaster
Agents should take this opportunity to assess their clients’ current coverage and make necessary adjustments. For instance, if a business has not secured business interruption coverage, it may be a good time to consider that option. For businesses as well as homeowners, agents may want to confirm the levels of coverage needed. Over time, the value of real property and the contents of the structures may change. The last thing a policyholder needs when disaster strikes is to learn he has insufficient coverage.
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